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Mission Grey Daily Brief - September 24, 2024

Summary of the Global Situation for Businesses and Investors

As global leaders gather at the United Nations, pressure mounts on President Biden to loosen restrictions on Ukraine's use of weapons. Meanwhile, China amplifies Russian war propaganda, influencing public opinion worldwide. In Britain, Prime Minister Keir Starmer faces challenges as he restricts payments for retirees. Lastly, Sri Lanka's new president, Anura Kumara Dissanayake, takes office, marking a potential shift in the country's foreign relations.

Ukraine Seeks More Weapons from the West

As the war in Ukraine enters its third year, President Volodymyr Zelensky is pushing for permission from President Biden to use longer-range weapons supplied by NATO to strike deeper inside Russia. This request comes as Ukraine slowly loses ground to mass Russian assaults in the Donbas region, and as Russian strikes target civilian infrastructure ahead of the approaching winter.

European lawmakers are urging EU member states to lift restrictions on Ukraine's use of Western weapons, arguing that the current limitations hinder Ukraine's ability to defend itself under international law. However, President Biden has been reluctant to escalate the conflict and risk a direct confrontation with Russia, as Putin already blames NATO for the war and has made veiled threats of nuclear retaliation.

China Amplifies Russian War Propaganda

China has emerged as a key player in the information war surrounding the Russia-Ukraine conflict. Through media strategies, China has shifted blame for the war from Russia to NATO and the US, even though Ukraine is not a NATO member. This alignment with Russian narratives stems from a strategic agreement between the two countries, creating an "echo chamber" effect.

China's primary objective appears to be criticizing Western countries, particularly the US and NATO, rather than showing genuine concern for Ukraine. Chinese media has drawn false distinctions between the Ukrainian government and its people, echoing Russian propaganda. This collaboration extends beyond the war, with Chinese media amplifying Russian narratives about Taiwan.

Britain's Prime Minister Faces Challenges

Britain's Prime Minister, Keir Starmer, is facing challenges as his Labour Party, which won a parliamentary majority in the July election with only 34% of the vote, takes a tough stance on economic issues. Starmer has restricted payments that help retirees with heating costs and has warned of impending budget cuts, causing concern among his allies and the British public.

As Starmer prepares to address his party's annual conference, analysts expect him to shift his tone and emphasize how the government's early harsh measures will lead to long-term benefits for Britain. Starmer is likely to highlight the legacy of issues he inherited and pivot to discussing structural changes that will strengthen the country.

Sri Lanka's New President Takes Office

Sri Lanka's new president, Anura Kumara Dissanayake (AKD), has been sworn in, marking a potential shift in the country's foreign relations. AKD, a 55-year-old Marxist leader, is known for his anti-India stance and proximity to China. His election comes after mass protests in 2022 that ousted the previous president, Gotabaya Rajapaksa, and his clan from power.

AKD campaigned as the candidate of "change," promising economic relief and an end to corruption. He has pledged to renegotiate the terms of the IMF bailout and abolish the powerful executive presidency. With China already leasing the strategic Hambantota Port, AKD's election poses a challenge to India's interests in the region.

Recommendations for Businesses and Investors

  • Ukraine-Russia Conflict: The conflict's impact on energy prices and supply chains should be closely monitored, especially with winter approaching. Businesses should assess their exposure to the region and consider supply chain diversification.

  • China's Propaganda Machine: Businesses should be cautious of operating in countries that heavily censor information and manipulate public opinion, such as China. Investing in countries with free media and strong democratic institutions reduces the risk of unexpected shifts in public sentiment and government policies.

  • Britain's Political Landscape: Businesses should consider how Starmer's potential long-term structural changes could impact their operations in Britain. While the current government's tough economic stance may cause short-term challenges, the focus on structural reforms could lead to a more stable and predictable business environment in the long term.

  • Sri Lanka's Foreign Relations: Companies investing in Sri Lanka should monitor the new president's foreign policy decisions, particularly regarding relations with China and India. A shift towards China could increase the country's debt burden and impact its ability to secure favorable trade deals with other nations.

Stay informed and stay resilient. Mission Grey is here to help you navigate the complex global landscape.


Further Reading:

As U.N. Meets, Pressure Mounts on Biden to Loosen Up on Arms for Ukraine - The New York Times

As Vietnam’s President Visits UN, ‘Carbon Neutrality’ Vanishes at Home - Asia Sentinel

At Least 16 Injured In Russian Air Strikes On Ukraine's Zaporizhzhya - Radio Free Europe / Radio Liberty

Britain's far right is hoping to strengthen its national presence - Le Monde

Britain’s Prime Minister, Bruised by a Dispute Over Freebies, Badly Needs a Reset - The New York Times

Chinese media amplifies Russia’s war propaganda, Taiwan watches warily - Euromaidan Press

Curfew lifted, change arrives: A firsthand view of Sri Lanka’s historic election - The Interpreter

Envisioning a better peace in Ukraine - The Strategist

Europe at odds with public on escalating war in Ukraine - Responsible Statecraft

Is Sri Lanka’s new president Anura Kumara Dissanayake bad news for India? - Firstpost

Themes around the World:

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Semiconductor Industry Ambitions

Japan is investing heavily in its semiconductor industry, aiming to reclaim its past dominance. The government has allocated 2 trillion yen to support domestic chip firms and international partnerships, leveraging its ties with the US, Taiwan, and South Korea, amid heightened trade tensions between the US and China.

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Political Instability

France's political landscape is precarious, with President Macron's gamble on new elections leaving Prime Minister Barnier's government without a majority in parliament. Wrangling with leftist and far-right groups could lead to a government collapse, causing uncertainty for businesses.

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Border Control Concerns

Germany's newly reintroduced land border controls have raised concerns among businesses about potential impacts on the economy. Border checks are causing delays and higher costs, affecting the movement of goods and workers. This could decrease trade, increase costs for companies and consumers, and trigger a chain reaction leading to possible economic losses in GDP.

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Geopolitical Risks and Sanctions

Geopolitical risks, particularly those associated with Russia's war in Ukraine, are a key concern for UK businesses. The UK has imposed sweeping sanctions on Russia's shadow fleet of oil tankers, targeting illicit oil exports. These sanctions are part of coordinated efforts with the US, Canada, and European nations to neutralize the threat posed by the shadow fleet to international trade and maritime safety.

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RegTech Industry

The UK's RegTech industry is expected to grow by 24.9% annually, reaching US$657.84 million in 2024. This growth is driven by technological advancements, regulatory pressures, and the need for efficient compliance solutions, with a focus on anti-money laundering and identity verification.

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Supply Chain Resilience

Thailand is a member of the Indo-Pacific Economic Framework for Prosperity (IPEF), which aims to build resilient and inclusive supply chains. The agreement addresses vulnerabilities and promotes diversification to withstand disruptions. Thailand's role in supply chains has been further bolstered by companies adopting a 'China plus one' strategy, reducing reliance on China.

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Global Manufacturing Woes

The global manufacturing industry is weakening, with major regions like the US, Eurozone, Japan, and China experiencing declining activity. This is causing supply chain problems and delays, especially in the Eurozone, while countries like the UK and India are showing modest growth.

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US-India Relations

The US-India relationship is crucial for both countries, with the US being India's largest trade partner. The outcome of the 2024 US presidential election will impact India's exports, investments, and economic growth, especially in defence, trade, and strategic sectors. The election of Donald Trump could bring challenges due to his stance on tariffs and immigration.

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Semiconductor Industry

Japan is a pivotal player in the global semiconductor industry, with the government allocating 2 trillion yen to boost its chip industry. Prime Minister Fumio Kishida has expressed support for the industry, and international partnerships are bolstering the prospects of Japanese semiconductor firms. The industry is projected to grow 2.3 times over the next decade, driven by advancements in AI, robotics, and automobiles.

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US Election Impact

The upcoming US presidential election between Kamala Harris and Donald Trump is impacting markets, with Trump's potential victory seen as inflationary and affecting global trade. Trump's proposed tariffs on imports may increase prices and anger US allies, while his economic proposals may add to the US deficit. Harris's plans are expected to have a lesser impact.

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US-China Trade Tensions

The US and China are engaged in a trade war, with both countries imposing tariffs and sanctions on each other's companies. This has disrupted supply chains and impacted businesses, causing them to reassess their exposure to China. The US has also restricted investment in Chinese tech firms, particularly in advanced technologies such as AI and quantum computing.

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Automotive Industry Crisis

The automotive industry, a key sector for Germany, is facing significant challenges. Volkswagen, a major manufacturer, plans to shut down factories and cut jobs due to weak sales and competition from Chinese manufacturers in the electric vehicle (EV) market. German carmakers are also facing pressure from Donald Trump's trade policies, threatening tariffs on vehicles not produced in the US, and the potential loss of subsidies for EVs.

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Energy Transition

Germany is transitioning to green energy, attracting investments. However, the shift away from cheap Russian energy has impacted its industries, and the country faces energy shortages.

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International Business Relations

India's Tata Group faces criticism for its involvement with Israel, particularly in the manufacturing of weapons and provision of IT services for the Israeli military. Activists urge companies like Amazon and Google to withdraw from deals connected to the Israeli military.

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Strong Economic Growth

India's economy is projected to grow at 7% in the current fiscal year and 6.5% in the next. This growth is driven by domestic manufacturing, infrastructure development, and financialization. The country's economic reforms and growing middle class have propelled companies like HDFC Bank onto the global stage.

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Tax Policy and Talent Drain

The new Labour government's planned tax increases, including a potential rise in capital gains tax, have sparked concerns about a brain drain, with tech entrepreneurs and investors considering relocation to countries like the UAE. This could impact the UK's attractiveness for starting and scaling high-growth businesses.

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Energy Transition

Germany's transition to green energy is attracting investments and has the potential to future-proof energy-intensive industries. However, the shift away from nuclear power and the phase-out of cheap Russian energy sources have created challenges, with energy prices remaining a factor of uncertainty.

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US Election Impact

The upcoming US presidential election is causing uncertainty for businesses, with companies postponing or scaling down investment plans. The election outcome will also impact the direction of US tariffs and trade policies, with a potential Trump victory seen as inflationary and affecting global trade.

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Border Controls and Trade Impact

Germany's newly reintroduced land border controls have raised concerns among businesses about potential delays and higher costs. This could affect the movement of goods and workers, increasing costs for companies and consumers, reducing trade volume, and impacting the overall German economy.

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Supply Chain Resilience

Thailand is part of the Indo-Pacific Economic Framework for Prosperity (IPEF), which aims to strengthen supply chain resilience among member countries. The agreement addresses vulnerabilities and promotes diversification to mitigate the impact of disruptions, ensuring the efficient flow of goods during global crises and reducing risks associated with overdependence on certain regions.

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Thailand's RegTech Market Growth

The RegTech industry in Thailand is expected to grow by 26.2% annually, reaching US$238.09 million in 2024 and US$509.77 million by 2029. This growth offers market opportunities and covers sectors such as banking, financial services, insurance, healthcare, telecommunications, and energy.

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Western Military Aid to Ukraine

Ukraine has received military aid, including weapons and fighter jets, from Western countries to support its defense against Russia. However, experts warn that many of these weapons may not survive the war if used to their maximum potential. The West needs to be prepared for potential losses while understanding that the support is crucial for Ukraine's victory.

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Cybersecurity Threats

The UK faces a surge in ransomware attacks, with data breaches reaching record highs. However, the number of incidents investigated by the Information Commissioner's Office (ICO) has dwindled, raising questions about its capacity to address the issue. The British government has pledged to introduce a Cyber Security and Resilience Bill to expand existing laws and increase mandatory incident reporting.

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US-China Competition

Competition with China is a key theme in US politics, with economic growth, military drills, and trade wars impacting businesses. China's lead in battery technology and supply chain control is a concern, while US tax policies and export controls aim to bolster domestic industries.

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Challenges in Accessing Finance

German firms are facing challenges in securing loans due to economic uncertainty and hesitancy from banks, impacting business investments and job creation. This is particularly difficult for smaller companies, with larger firms like Volkswagen and BMW opting to increase investments abroad.

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Georgia's EU Aspirations

Georgia's ambition to join the EU is enshrined in its constitution, with polls showing consistent support. However, the recent victory of the anti-Western Georgian Dream party has put these plans on hold, and the country now faces a potential lurch towards authoritarianism and closer ties with Russia.

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Energy Crisis and Transition to Clean Energy

The UK is facing an energy crisis due to its heavy reliance on gas, which has led to surging energy costs and a cost-of-living crisis. The government has committed to transitioning to clean energy and electric vehicles (EVs), with plans to invest in renewable energy sources and infrastructure. However, there are concerns about the UK's underpreparedness for another energy crisis and the impact on households and businesses.

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India-Canada Diplomatic Tensions

India-Canada diplomatic ties have hit a low due to accusations by Canadian officials of Indian government agents' involvement in murder and extortion. While no economic retaliation has been imposed yet, experts warn of potential negative consequences for economic growth. Bilateral trade is worth billions, and the rift raises concerns over trade and immigration ties, with businesspeople from both countries possibly seeking opportunities elsewhere. Visa restrictions and delays in immigration processing are also areas of worry.

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Thailand's Investment Opportunities

Thailand has seen a record investment influx of $21.6 billion in the first nine months of 2024, a 42% increase from the previous year. The Thailand Board of Investment (BOI) attributes this to the country's strategic location, robust digital infrastructure, clean energy resources, and strong government support. Foreign Direct Investment (FDI) has expanded, with the top 5 countries being Singapore, China, Hong Kong, Taiwan, and Japan.

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Thailand's International Trade Relations

Thailand is seeking the renewal of tariff benefits under the Generalized System of Preferences (GSP) from the US. Thailand's Commerce Minister emphasized the country's potential as a manufacturing base in the supply chain for key US industries, including digital, AI, electronics, and semiconductors. Thailand also invited US investment in its food industry, highlighting its strength in food security and export potential to emerging markets.

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Energy Security

Ukraine is facing energy security issues due to Russian attacks on its power plants and infrastructure. The loss of nuclear power and electricity generation capacity could lead to blackouts and a humanitarian crisis during the upcoming winter. The EU and the US are providing financial support, backup equipment, and humanitarian aid to bolster Ukraine's energy sector.

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US-India Relations

The US presidential election outcome will significantly impact India, particularly in defence, trade, and strategic sectors. A Trump victory may lead to higher tariffs and immigration restrictions, while a Harris presidency is likely to emphasize economic resilience and reduce reliance on global supply chains. The US is a major investor in India across various sectors.

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Geopolitical Risks

India's role in supplying restricted technology to Russia has raised concerns among Western allies. This underscores the challenges of enforcing sanctions and the potential for India to fill gaps in the global supply chain due to its position as an intermediary.

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Banking and Lending Environment

German firms are struggling to secure loans due to economic uncertainty and banks' hesitancy. This limits business investments and job creation, impacting economic growth. However, there is anticipation that the European Central Bank's monetary policy decisions could improve lending conditions and stimulate economic activity.

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Ukraine's Drone Industry

Ukraine's drone industry has become a critical aspect of its military strategy. The country has been developing and producing its own drones, which are more precise and resilient than those provided by Western partners. This self-reliance may impact American firms' demand for their equipment. Ukraine is also considering lifting an export ban on drones to generate revenue for local companies, but this raises concerns about Russian forces obtaining sensitive technology.

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UK's RegTech Sector

The UK's RegTech industry is expected to grow substantially, driven by technological advancements and increasing regulatory pressures. The demand for RegTech solutions is rising as organizations seek to enhance compliance and risk management capabilities, particularly in the financial sector.